The main legal point established in the judgment is that for a sale to be deemed as inter-State under section 3(b) of the Central Sales Tax Act, 1956, the transfer of documents of title to the goods must occur during their movement from one State to another, and the property in the goods must pass at that time, not merely based on an agreement to sell.

The judgment of the Court was delivered by

A. P. RAVANI, J. - This is a reference under section 69 of the Gujarat Sales Tax Act, 1969, at the instance of the Revenue. Opponent-assessee is a partnership firm. It was registered as a dealer under the Bombay Sales Tax Act, 1959 up to May 5, 1970 and thereafter, i.e., from May 6, 1970, it is registered as a dealer under the Gujarat Sales Tax Act, 1969. The assessee is also registered as a dealer under the Central Sales Tax Act, 1956. It deals with the business of certain chemicals and instruments and is also engaged in manufacture and sale of two articles known as "table-wax" and "wexol". It carries on its business at Rajkot. On August 10, 1973, the business premises of the assessee were searched and the account books and other documents for Samvat Years 2026 to 2029 were seized.

2. The Sales Tax Officer, Rajkot, found that there was suppression of sales and therefore issued notice with regard to the correct assessment of the turnover and also issued notice with regard to certain sales effected by the assessee which were considered as local sales. According to the department these sales were really inter-State sales under section 3(b) of the Central Act and attracted the provisions of the Central Sales Tax Act, 1956. This reference is concerned with the dispute regarding these sale transactions.

3. The modus operandi in these sale transactions was that the assessee purchased goods from Bombay. These goods were to be despatched to Rajkot. The assessee handed over the railway receipts to the purchasers of the goods at Rajkot. These purchasers, after taking delivery of the goods from the railway, carried out inspection of the goods. After carrying out such inspection they made payment of the goods. It was the case of the assessee that the sales were concluded only after the inspection of the goods was carried out by the purchasers and only after they approved the goods. The assessee collected tax from the customers as applicable under the provisions of the Bombay Sales Tax Act, 1959 and under the provisions of the Gujarat Sales Tax Act, 1969. The assessee credited the amount of tax to the Sales Tax Officer together with the amount due on its remaining turnover of sales of the relevant accounting periods.

4. The Sales Tax Officer held that in these sale transactions the property in the goods passed at the time of delivery of the railway receipts because at the time of delivery of the railway receipts the movement of the goods had already commenced. The Sales Tax Officer, further held that the transactions attracted the provisions of the Central Sales Tax Act, 1956 and not that of Bombay Sales Tax Act, 1959 or Gujarat Sales Tax Act, 1969 and he made assessment accordingly. The Sales Tax Officer also imposed penalty under the appropriate provisions of the Bombay Sales Tax Act, 1959 and also under the appropriate provisions of the Gujarat Sales Tax Act, 1969. As a result of this order, the amount credited by the assessee to the Sales Tax Officer through periodical returns of the relevant turnovers of sales were forfeited to the Government and the additional liability under the Central Sales Tax Act, 1956, accrued. The assessee filed appeal under the provision of the Bombay Sales Tax Act, 1959 and the Gujarat Sales Tax Act, 1969. The appeals were heard by the learned Assistant Commissioner. He confirmed the finding arrived at by the Sales Tax Officer. The assessee preferred second appeal before the Tribunal.

5. The Tribunal upheld the contention of the assessee that the sale transactions in question were local sales and not inter-State sales. The Tribunal relied upon a decision of the Supreme Court in the case of Tata Iron and Steel Co. Limited v. S. R. Sarkar reported in [1960] 11 STC 655. The Tribunal found on facts that no complete sale of goods has taken place either at the time of, or merely as a result of, the transfer of railway receipts by the assessee-firm to the intendin